Considering selling BTL flat. How to invest 500k?

CaveBird

I’m by no means a financial expert, but we were in a similar situation after my mother in law died in 2019 in that we became accidental landlords alongside my brother in law. We opted to continue renting the house out (mother in law had been moved into sheltered accommodation a year before she passed away so the house already had tenants in it). The tenants were reliable and were from the local US Air Force base. In 2022 the tenants served notice and my brother in law said he wanted to cash in his share of the property as he wanted to clear his own mortgage so the house was put up for sale.

It sold after a few months on the market for £610k (February this year) and my husband and brother in law had a CGT bill of about £6,000 each to pay based on the probate value of the house.

Our share sat for a while, we toyed with investing it in a smaller BTL ourselves but couldn’t find anything in our area that would have meant we could cover all costs with the cash, so we opted to look at investments instead.

Long story short but we’ve put our maximum ISA allowance (£40k total) away and locked £100k in the NS&I 6.2% bond. We’re toying with what to do with another £100k - probably going to max out premium bonds for the moment as we don’t want it locked away long term, and we’ve put the remainder in the Santander Easy Access paying 5.2% for now. Husband has just quit his job due to stress so we wanted to make sure we had a good lump sum of cash available to cover expenses if he ends up out of work for a while. Long term plan is to pay off our own mortgage when the fixed rate ends in October 2025 (1.48% so no point in clearing it now!).

Albermarle

CaveBird said:

I’m by no means a financial expert, but we were in a similar situation after my mother in law died in 2019 in that we became accidental landlords alongside my brother in law. We opted to continue renting the house out (mother in law had been moved into sheltered accommodation a year before she passed away so the house already had tenants in it). The tenants were reliable and were from the local US Air Force base. In 2022 the tenants served notice and my brother in law said he wanted to cash in his share of the property as he wanted to clear his own mortgage so the house was put up for sale.

It sold after a few months on the market for £610k (February this year) and my husband and brother in law had a CGT bill of about £6,000 each to pay based on the probate value of the house.

Our share sat for a while, we toyed with investing it in a smaller BTL ourselves but couldn’t find anything in our area that would have meant we could cover all costs with the cash, so we opted to look at investments instead.

Long story short but we’ve put our maximum ISA allowance (£40k total) away and locked £100k in the NS&I 6.2% bond. We’re toying with what to do with another £100k - probably going to max out premium bonds for the moment as we don’t want it locked away long term, and we’ve put the remainder in the Santander Easy Access paying 5.2% for now. Husband has just quit his job due to stress so we wanted to make sure we had a good lump sum of cash available to cover expenses if he ends up out of work for a while. Long term plan is to pay off our own mortgage when the fixed rate ends in October 2025 (1.48% so no point in clearing it now!).

Do not forget about the longer term future and also think about investing some of it, via a pension is usually the best way.

jimjames

ConfusedCF said:

Other than a BTL, what would be the next safest option of investing that money? I have a small amount of shares that I manage myself, but am not knowledgeable on that front at all. The risk of losing money worries me and I wouldn't want to invest more than 100k that way.

Your comment implies that BTL is a safe way of investing money but I think many people would disagree with that assessment. You could easily lose money on a BTL if property prices go down as they have previously or if the tenants stop paying and trash the place.

Having a mixed portfolio of investments is a good option as it means you're not tied to the success or otherwise of one asset class (like property). Making use of all the tax breaks available is also a good plan so look at pensions as well as S&S ISAs.

El_Torro

A property worth £560k getting £1.7k a month in rent isn't a great BTL investment I would say. So just based on that it seems your decision to sell it is the right one. 

As mentioned it really depends on what your objectives are for your money. However having £500k and only putting £100k of it into stocks and shares does not sound like a good idea. You will lose a lot of money to inflation if you stick with this plan. 

It's good that you're planning to engage an IFA. It's a good idea to get a free consultation with 2 or 3 IFAs and then choose the one you feel most comfortable with. You can make more money by going it alone, but if you make the wrong investment decisions you can also lose a lot of money by going it alone. 

Making the most of Stocks & Shares ISAs and your pension should probably be a big part of your strategy. In order to make the most of this though you will need to get over your aversion to stock market investments. The right IFA can help you on this journey.